Yahoo Finance Yangaroo Inc (CVE:YOO): Time For A Financial Health Check
While small-cap stocks, such as Yangaroo Inc (CVE:YOO) with its market cap of CA$9.2m, are popular for their explosive growth, investors should also be aware of their balance sheet to judge whether the company can survive a downturn. Given that YOO is not presently profitable, it’s essential to evaluate the current state of its operations and pathway to profitability. Here are a few basic checks that are good enough to have a broad overview of the company’s financial strength. Nevertheless, since I only look at basic financial figures, I’d encourage you to dig deeper yourself into YOO here.
How much cash does YOO generate through its operations?
YOO has sustained its debt level by about CA$573.0k over the last 12 months – this includes both the current and long-term debt. At this constant level of debt, YOO’s cash and short-term investments stands at CA$1.4m , ready to deploy into the business. Moreover, YOO has produced CA$875.2k in operating cash flow in the last twelve months, leading to an operating cash to total debt ratio of 153%, indicating that YOO’s debt is appropriately covered by operating cash. This ratio can also be interpreted as a measure of efficiency for unprofitable businesses since metrics such as return on asset (ROA) requires positive earnings. In YOO’s case, it is able to generate 1.53x cash from its debt capital.
Does YOO’s liquid assets cover its short-term commitments?
At the current liabilities level of CA$1.1m liabilities, the company has been able to meet these obligations given the level of current assets of CA$3.3m, with a current ratio of 2.97x. Generally, for Interactive Media and Services companies, this is a reasonable ratio as there’s enough of a cash buffer without holding too much capital in low return investments.
Is YOO’s debt level acceptable?
YOO’s level of debt is appropriate relative to its total equity, at 32.7%. This range is considered safe as YOO is not taking on too much debt obligation, which may be constraining for future growth. Investors’ risk associated with debt is very low with YOO, and the company has plenty of headroom and ability to raise debt should it need to in the future.
Next Steps:
YOO has demonstrated its ability to generate sufficient levels of cash flow, while its debt hovers at an appropriate level. Furthermore, the company exhibits proper management of current assets and upcoming liabilities. Keep in mind I haven’t considered other factors such as how YOO has been performing in the past. You should continue to research Yangaroo to get a more holistic view of the stock by looking at:
Valuation: What is YOO worth today? Is the stock undervalued, even when its growth outlook is factored into its intrinsic value? The intrinsic value infographic in our free research report helps visualize whether YOO is currently mispriced by the market.
Historical Performance: What has YOO’s returns been like over the past? Go into more detail in the past track record analysis and take a look at the free visual representations of our analysis for more clarity.
Other High-Performing Stocks: Are there other stocks that provide better prospects with proven track records? Explore our free list of these great stocks here.
To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at editorial-team@simplywallst.com.
